What Form 1042-S (2012) Is For
Form 1042-S (2012) reports income paid by U.S. withholding agents to foreign persons, such as foreign corporations, partnerships, and nonresident aliens. The form covers source income subject to U.S. tax withholding, including dividends, interest, and other specified types of income. Withholding agents use this IRS form to show gross income, federal tax withheld, and treaty benefits applied under an approved tax treaty.
When You’d Use Form 1042-S (2012)
Withholding agents must file Form 1042-S when they pay U.S.-source income to foreign persons or foreign corporations, even if no federal tax was withheld due to a tax treaty. The filing is required when income paid includes effectively connected income, scholarship or fellowship grants, or federal procurement payments. Both electronic filing and paper filing must follow Internal Revenue Service rules for accurate reporting.
Key Rules or Details for 2012
- Filing deadline: The due date for Form 1042-S is March 15, 2013. If this date falls on a legal holiday, file on the next business day.
- Who must file: Each designated withholding agent and primary withholding agent is responsible for filing the annual withholding tax return and all required information returns.
- Electronic filing requirement: Withholding agents filing information returns electronically must use the FIRE system when submitting 250 or more forms.
- Amended or late filing: If errors occur or overwithheld tax is repaid, an amended return must be filed promptly with the Internal Revenue Service.
- Reporting requirements: Report amounts withheld, gross income, and the applicable tax rate for each foreign person or foreign corporation.
- Documentation: Include the foreign tax identification number, foreign postal code, and recipient’s account number when available for each record.
- Companion forms: File Form 1042, the annual withholding tax return, to summarize federal tax withheld and total income subject to withholding.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Identify reportable income paid
Determine all income paid during the year that qualifies as U.S.-source income subject to withholding. This may include dependent personal services, independent personal services, dividends paid, or income codes associated with financial institutions and foreign partnerships.
Step 2: Gather required documentation
Collect valid withholding certificates, such as Form W-8BEN or Form W-8ECI, that establish the recipient’s status, foreign tax identification number, and country of residence for tax purposes. These ensure proper application of treaty benefits and accurate reporting.
Step 3: Calculate tax withholding
Apply the correct tax rate under U.S. tax laws. The standard rate is 30% of gross income unless reduced by claiming treaty benefits through a tax treaty. Document each rate used for every foreign person or disregarded entity to maintain tax compliance.
Step 4: Complete Form 1042-S accurately
Enter the following income codes, recipient details, and withholding agent information. Record gross income, tax rate, federal tax withheld, and country details such as foreign postal code. Include any overwithheld tax repaid, and identify the withholding agent’s name for each submission.
Step 5: File Form 1042-S and Form 1042
Submit Form 1042-S to the IRS and provide copies to each foreign recipient by the due date. File Form 1042 to report total income subject to withholding, tax liability, and all federal procurement payments. Use electronic filing when required to ensure timely processing.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Incorrect income codes: Use only the proper codes provided in IRS instructions to describe the income paid. To avoid mistakes, review the list of income codes carefully before submitting your return.
- Missing identification details: Many forms are rejected when the foreign tax identification number or foreign postal code is missing. To prevent rejection, double-check every field before submission.
- Improper use of treaty benefits: Some withholding agents fail to verify the eligibility of taxpayers for treaty benefits. To stay compliant, confirm the taxpayer identification number and signed documentation before applying reduced rates.
- Overwithheld tax not repaid: When an overwithheld tax is refunded, agents must amend the report. To correct errors, submit an amended return showing adjusted amounts withheld.
- Late Filings: Filing after the due date can result in penalties. To avoid penalties, file on time or request an extension before the deadline using IRS Form 8809.
- Incorrect electronic filing format: Errors occur when the format used does not match IRS electronic filing standards. To prevent rejections, follow Publication 1187 for the proper file layout.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After Form 1042-S and Form 1042 are filed, the Internal Revenue Service reviews both returns for accuracy and consistency. The IRS verifies that the total gross income, income subject to withholding, and tax paid reported on the federal tax return match the records. Foreign persons may use the form to claim foreign tax credits or refunds through their home country’s tax authorities. Withholding agents must retain copies for at least three years to ensure compliance with U.S. tax laws.
FAQs
Do foreign corporations need to file Form 1042-S (2012)?
Foreign corporations that receive U.S.-source income must ensure that a withholding agent reports their income on Form 1042-S. They may also use this IRS form to support a federal tax return if required.
How do foreign persons report income paid under a tax treaty?
Foreign persons receiving income paid under a tax treaty must provide a valid foreign tax identification number and supporting documentation. This helps the withholding agent apply the correct tax rate and report tax withheld properly.
What are the income codes used on Form 1042-S (2012)?
Income codes categorize the type of income subject to withholding, including dividends, interest, and compensation for independent contractors. Each code must be reported accurately for the IRS to identify the nature of payments.
What if the foreign postal code or taxpayer identification number is missing?
If either the foreign postal code or the taxpayer identification number is missing, the return may be rejected. Withholding agents should verify all data before submitting to ensure complete and accurate reporting.
When is the due date for filing Form 1042-S and Form 1042?
The due date for both the information return and the annual withholding tax return is March 15, 2013. If the date falls on a legal holiday, the next business day becomes the filing deadline.
How should foreign partnerships report income subject to withholding?
Foreign partnerships must ensure the primary withholding agent or designated withholding agent files Form 1042-S. Each foreign partner’s share of gross income and tax paid should be reported separately to comply with tax laws.
How is effectively connected income treated under Form 1042-S (2012)?
Effectively connected income that is subject to withholding must be reported with the proper income code. The withholding agent filing the report must apply the correct tax rate in accordance with U.S. tax laws and treaty benefits.
